You Have to Be Able to Rise Above It (the Story of a $1 Billion “Mistake”)
Robert E. Siegel
Lecturer in Management - Stanford Graduate School of Business, Venture Investor, Author The Systems Leader and The Brains and Brawn Company
In moments of extreme stress and pressure, people show you who they really are and what really matters to them.
It’s one thing to be visionary, optimistic, generous, and benevolent when everything is going well and everyone loves you. But the true test for any Systems Leader is what happens when things go off the rails.
Can you stay calm and focused?
Can you maintain your priorities and clarity of purpose?
A $1 Billion “Mistake”
I was at Intel in 1994 when a math professor discovered a modest bug in the “floating-point unit” of our flagship product, the Pentium processor chip. When performing certain advanced numeric calculations, the Pentium would return slightly incorrect results several places after the decimal point. The vast majority of PC users would never experience an error, even if they were scientists doing high-level work. In fact, Byte magazine estimated that only one in nine billion calculations done with those chips would produce inaccurate results.
But if the technical problem was modest, the PR problem was the opposite. The tech media pounced on the Pentium bug. Before long many mainstream media outlets were challenging Intel’s reputation for building high-quality products. Some even compared the situation to the Tylenol poisoning crisis of 1982, in which seven people died — an absurd comparison for a glitch that most users would never even notice.
I remember going home for Thanksgiving in 1994 when my grandfather said, “Robert, I saw your company in the news. I’m sorry things are so messed up there.” This was from a man who didn’t follow tech news (he ran an egg factory for most of his working life), but even he knew that Intel was being raked over the coals.
I watched our famously tough and brilliant CEO, Andy Grove, shift his position from dismissing this minor glitch as no big deal to taking full public responsibility for it. A few weeks after the furor began, we offered to replace every defective Pentium chip for every customer who wanted a new one — an offer that forced Intel to take a $475 million hit to our earnings that year (equivalent to over $1 billion in 2024). Andy faced a lot of heat from the entire tech industry for needing to do the first-ever recall of a computer chip. I watched him process his anger at the unfairness of the situation, including many ignorant attacks on both his own leadership and the integrity of his beloved company.
But Andy didn’t let his anger throw him off course. He knew he had to swallow his pride and accept a big loss to save the company, so he did. He led the entire staff through the crisis by keeping our spirits up. He told us that we would get through this adversity and move forward to better days. And we believed him — in part because we all knew his background as a Hungarian refugee who had twice escaped death, from the Nazis during the Holocaust and from the Soviets during the Hungarian Revolution.
Those early traumas gave Andy an unshakable sense of perspective, courage, and determination that helped make him an exceptionally effective leader.
The Pentium catastrophe led Andy to write one of the most admired business books of all time, Only the Paranoid Survive, so he could share his lessons (and mistakes) with other leaders. I was lucky enough to be tapped by Andy to conduct research for that book, and so I had a front row seat to watch him as he turned a profound business problem into an opportunity to teach others how to be resilient in tough times.
How to Rise Above It
About two decades later, I had another ringside seat as another tough and brilliant CEO, Jeff Immelt, also saw his stellar reputation take a beating. After decades of steady growth, GE’s financial performance and stock price stagnated during his tenure due to a wide range of economic pressures, historical structural decisions at GE, operating missteps, and broader trends in a variety of GE’s markets. The same pundits who had previously hailed Jeff as one of the world’s greatest executives now trashed him for alleged incompetence and a couple of badly timed acquisitions. He was pressured into retirement in 2017.
When Jeff started co-teaching with me at Stanford the following year, he was still getting vilified in the press in very personal terms. I once asked how his skin was thick enough that he didn’t get rattled by an attack on the cover of The Wall Street Journal or Fortune. He replied, “I don't have thick skin. It hurts. But one of my mentors taught me that you have to be able to rise above it.”
These Stories Are Not for Sympathy
I share these stories not to solicit sympathy for two extremely successful leaders, neither of whom would ever ask for sympathy themselves. My point is that Jeff, like Andy, accepted the lows as well as the highs of his exalted position. Jeff never vented or whined publicly about the unfairness of those articles. On the contrary, he repeatedly offered to resign from Stanford if we thought he had become too toxic to teach at the university. He never wanted his troubles to reflect badly on the institution. But I was certain that our students benefited tremendously from Jeff's experiences, including the bad ones, whenever he was in front of the room. He hadn’t done anything illegal or immoral; he’d just faced an extremely public reckoning during one of the hardest eras for one of the world’s largest companies.
Our guest speakers — senior leaders who knew how hard it is to make huge decisions with limited information — still universally respected Jeff. Many of them privately voiced concerns to me about how he was holding up and publicly praised him to our students with sincere enthusiasm. In his memoir, Hot Seat, Jeff observes that “It’s your peers who promote you.” It’s also your peers who will determine your reputation in the long run, after today’s problems fade into history.
I believe Jeff was even more impactful as a teacher because he had gone through hard times; he was well qualified to help new leaders prepare for their own inevitable crises and failures. He was also living proof that any of us can do so many things right yet still have moments of failure.
Any of us can be derailed by bad timing or forces beyond our control, as well as by our own mistakes. The big questions in those scenarios:
Your answers to these questions will define your leadership.
The Systems Leader is available now. It is a journey well worth going on, and I hope you’ll join me.
About The Systems Leader:
A groundbreaking blueprint for mastering “cross-pressures” in a rapidly changing world, teaching leaders to execute and innovate, think locally and globally, and project ambition and statesmanship alike—from a Stanford Graduate School of Business lecturer and consultant to some of the biggest and most innovative CEOs.
Actionable and powerful, The Systems Leader is a playbook for riding turbulent waves instead of drowning in them—and for taking readers from chaos to clarity.
About Robert:
Robert Siegel is a Lecturer in Management at the Stanford Graduate School of Business, a venture investor, and an operator.
At the Stanford Graduate School of Business he has taught nine different courses, authored over 115 business cases, and led research on companies including Google, Charles Schwab, Daimler, AB InBev, Box, Stripe, Target, AngelList, 23andMe, Majid Al Futtaim, Tableau, PayPal, Medium, Autodesk, Minted, Axel Springer and Michelin, amongst others.
Robert is a Venture Partner at Piva and a General Partner at XSeed Capital. He sits on the Board of Directors of Avochato and FindMine, and led investments in Zooz (acquired by PayU of Naspers), Hive, Lex Machina (acquired by LexisNexis of RELX Group ), CirroSecure (acquired by Palo Alto Networks), Nova Credit, The League (acquired by Match Group), Teapot (acquired by Stripe), Pixlee (acquired by Emplifi), and SIPX (acquired by ProQuest).
He is the author of The Systems Leader: Mastering the Cross-Pressures That Make or Break Today's Companies, and The Brains and Brawn Company: How Leading Organizations Blend the Best of Digital and Physical.
He is the co-inventor of four patents and served as lead researcher for Andy Grove’s best-selling book, Only the Paranoid Survive.
Robert holds a BA from UC Berkeley and an MBA from Stanford University. He is married with three grown children.